The Matthews China Fund (Trades, Portfolio) released its first-quarter portfolio update, revealing that its top trades included a reduction to its position in PDD Holdings (PDD, Financial) and new holdings of four companies: Ping An Insurance (Group) Co. of China Ltd. (HKSE:02318, Financial), JD Health International Inc. (HKSE:06618, Financial), Zhejiang Supcon Technology Co. Ltd. (SHSE:688777, Financial) and ENN Energy Holdings Ltd. (HKSE:02688, Financial).
The fund seeks long-term capital appreciation by investing primarily in the stock of companies headquartered in China or Hong Kong. The fund looks for companies that are capable of sustainable growth based on several factors, including balance sheet health, size and stability of cash flows, management depth and corporate governance.
As of March, the fund’s $770 million equity portfolio contains 52 stocks with a quarterly turnover ratio of 14%. The top four sectors in terms of weight are consumer cyclical, financial services, industrials and technology, representing 36.13%, 17.46%, 10.10% and 9.01% of the equity portfolio.
Investors should be aware that portfolio updates for mutual funds do not necessarily provide a complete picture of a guru’s holdings. The data is sourced from the quarterly updates on the website of the fund(s) in question. This usually consists of long equity positions in U.S. and foreign stocks. All numbers are as of the quarter’s end only; it is possible the guru may have already made changes to the positions after the quarter ended. However, even this limited data can provide valuable information.
PDD Holdings
The fund sold 160,049 shares of PDD Holdings (PDD, Financial), trimming 22.25% of the position and 1.76% of its equity portfolio.
Shares of PDD Holdings averaged $90.39 during the first quarter; the stock is significantly undervalued based on its price-to-GF Value ratio of 0.46 as of Monday.
PDD Holdings is the holding company of Shanghai-based Pinduoduo. The company has a GF Score of 72 out of 100 based on a financial strength rank of 9 out of 10, a growth rank of 7 out of 10, a momentum rank of 3 out of 10 and a rank of 4 out of 10 for profitability and GF Value.
The company’s high financial strength rank is driven by several positive investing signs, which include a high Piotroski F-score of 8 out of 9, a strong Altman Z-score of 4.61 and an interest coverage ratio that outperforms more than 93% of global competitors.
Other gurus with holdings in PDD Holdings include Baillie Gifford (Trades, Portfolio), Bridgewater Associates and Jim Simons (Trades, Portfolio)’ Renaissance Technologies.
Ping An Insurance
The fund invested in 2,297,500 shares of Ping An Insurance (HKSE:02318, Financial), giving the position 1.93% equity portfolio weight.
Shares of Ping An Insurance averaged 56.04 Hong Kong dollars ($7.14) during the first quarter; the stock is fairly valued based on its price-to-GF Value ratio of 0.96 as of Monday.
The Shenzhen, Guangdong-based integrated insurance company has a GF Score of 77 out of 100 based on a momentum rank of 8 out of 10, a GF Value rank of 5 out of 10, a financial strength rank of 4 out of 10 and a rank of 6 out of 10 for profitability and growth.
The company’s low financial strength rank is driven by several warning signs, which include a debt-to-equity ratio that underperforms approximately 93% of global competitors and an interest coverage ratio that underperforms approximately 82% of global insurance companies.
JD Health International
The fund purchased 1,644,150 shares of JD Health International (HKSE:06618, Financial), giving the position 1.58% equity portfolio weight. Shares averaged HK$61.95 during the first quarter.
The health care e-commerce platform is approximately 67% owned by Beijing-based JD.com Inc. (JD, Financial). JD Health International has a GF Score of 48 out of 100 based on a profitability rank of 6 out of 10 and a rank of 8 out of 10 for growth and financial strength. Despite this, the company does not have enough data to compute ranks for GF Value and momentum and thus, the GF Score may give an incomplete picture of its potential.
The company’s high financial strength rank is driven by several positive investing signs, which include a high Altman Z-score of 11.92 and a debt-to-equity ratio that outperforms approximately 99% of global competitors.
Zhejiang Supcon Technology
The fund purchased 771,677 shares of Zhejiang Supcon Technology (SHSE:688777, Financial), giving the position 1.52% equity portfolio weight. Shares averaged 95.58 yuan ($13.83) during the first quarter.
The Hangzhou, Zhejiang-based automation control company has a GF Score of 53 out of 100 based on a growth rank of 9 out of 10, a profitability rank of 8 out of 10 and a financial strength rank of 7 out of 10. Despite this, the stock does not have enough data to compute ranks for momentum and GF Value and thus, the GF Score may give an incomplete picture of the stock’s potential.
The company’s high growth rank is driven by several positive investing signs, which include three-year revenue and book value growth rates that are outperforming more than 90% of global competitors.
ENN Energy Holdings
The fund invested in 848,700 shares of ENN Energy Holdings (HKSE:02688, Financial), giving the position 1.51% equity portfolio weight.
Shares of ENN Energy Holdings averaged HK$115.26 during the first quarter; the stock is modestly undervalued based on its price-to-GF Value ratio of 0.77 as of Monday.
The Chinese natural gas company has a GF Score of 95 out of 100 based on a growth rank of 10 out of 10, a profitability rank of 9 out of 10, a momentum rank of 8 out of 10, a GF Value rank of 7 out of 10 and a financial strength rank of 6 out of 10.
ENN Energy Holdings’ high growth rank is driven by several positive investing signs, which include a 4.5-star business predictability rank and a three-year revenue growth rate that outperforms approximately 77% of global competitors.
